Dr. Brett Coldiron removes potentially cancerous skin cells from a patient during Mohs surgery at his private practice in Cincinnati. Specialty doctors are receiving big returns from minor procedures, raising patients' costs due to lucrative treatments that often involve several doctors from highly compensated specialties  chiefly among them dermatology.

Patient costs skyrocket while specialists’ incomes soar

By Elisabeth Rosenthal /
New York Times News Service

Published Jan 19, 2014 at 12:01AM

CONWAY, Ark. — Kim Little had not thought much about the tiny white spot on the side of her cheek until a physician’s assistant at her dermatologist’s office warned that it might be cancerous. He took a biopsy, returning 15 minutes later to confirm the diagnosis and schedule her for an outpatient procedure at the Arkansas Skin Cancer Center in Little Rock, 30 miles away.

That was the prelude to a daylong medical odyssey several weeks later, through different private offices on the manicured campus at the Baptist Health Medical Center that involved a dermatologist, an anesthesiologist and an ophthalmologist who practices plastic surgery. It generated bills of more than $25,000.

“I felt like I was a hostage,” said Little, a professor of history at the University of Central Arkansas, who had been told beforehand that she would need just a couple of stitches. “I didn’t have any clue how much they were going to bill. I had no idea it would be so much.”

Little’s seemingly minor medical problem — she had the least dangerous form of skin cancer — racked up big bills because it involved three doctors from specialties that are among the highest compensated in medicine, and it was done on the grounds of a hospital.

Many specialists have become particularly adept at the business of medicine by becoming more entrepreneurial, protecting their turf through aggressive lobbying by their medical societies, and most of all, increasing revenues by offering new procedures — or doing more of lucrative ones.

It does not matter if the procedure is big or small, learned in a decade of training or a weeklong course. In fact, minor procedures typically offer the best return on investment: A cardiac surgeon can perform only a couple of bypass operations a day, but other specialists can perform a dozen procedures in that time span.

That math explains why the incomes of dermatologists, gastroenterologists and oncologists rose 50 percent or more between 1995 and 2012, even when adjusted for inflation, while those for primary care physicians rose only 10 percent and lag far behind, because insurers pay far less for traditional doctoring tasks like listening for a heart murmur or prescribing the right antibiotic.

By 2012, dermatologists — whose incomes were more or less on par with internists in 1985 — had become the fourth-highest earners in American medicine in some surveys, bringing in an average of $471,555, according to the Medical Group Management Association, which tracks doctors’ income, though their workload is one of the lightest.

In addition, salary figures often understate physician earning power because they often do not include revenue from business activities: fees for blood or pathology tests at a lab that the doctor owns or “facility” charges at an ambulatory surgery center where the physician is an investor, for example.

“The high earning in many fields relates mostly to how well they’ve managed to monetize treatment — if you freeze off 18 lesions and bill separately for surgery for each, it can be very lucrative,” said Dr. Steven Schroeder, a professor at the University of California and the chairman of the National Commission on Physician Payment Reform, an initiative funded in part by the Robert Wood Johnson Foundation.

Doctors’ charges — and the incentives they reflect — are a major factor in the nation’s $2.7 trillion medical bill. Payments to doctors in the United States, who make far more than their counterparts in other developed countries, account for 20 percent of American health care expenses, second only to hospital costs.

Specialists earn an average of two and often four times as much as primary care physicians in the United States, a differential that far surpasses that in all other developed countries, according to Miriam Laugesen, a professor at Columbia University’s Mailman School of Public Health. That earnings gap has deleterious effects: Only an estimated 25 percent of new physicians end up in primary care, at the very time that health policy experts say front-line doctors are badly needed, according to Dr. Christine Sinsky, an Iowa internist who studies physician satisfaction. In fact, many pediatricians and general doctors in private practice say they are struggling to survive.

Studies show that more specialists mean more tests and more expensive care.

“It may be better to wait and see, but waiting doesn’t make you money,” said Jean Mitchell, a professor of health economics at Georgetown University. “It’s ‘Let me do a little snip of tissue’ and then they get professional, lab and facility fees. Each patient is like an ATM machine.”

For example, the procedure performed on Little, called Mohs surgery, involves slicing off a skin cancer in layers under local anesthesia, with microscopic pathology performed between each “stage” until the growth has been removed.

Although it offers clear advantages in certain cases, it is more expensive than simply cutting or freezing off a lesion. (Hospitals seeking to hire a staff dermatologist for Mohs surgery had to offer an average of $586,083 in 2010, even more than for a cardiac surgeon, according to Becker’s Hospital Review.)

Use of the surgery has skyrocketed in the United States — more than 400 percent in a little over a decade — to the point that last summer Medicare put it at the top of its “potentially misvalued” list of overused or overpriced procedures. Even the American Academy of Dermatology agrees that the surgery is sometimes used inappropriately. Dr. Brett Coldiron, president-elect of the academy, defended skin doctors as “very cost-efficient” specialists who deal in thousands of diagnoses and called Mohs “a wonderful tool.” He said that his specialty was being unfairly targeted by insurers because of general frustration with medical prices.

“Health care reform is a subsidized buffet and if it’s too expensive, you go to the kitchen and shoot one of the cooks,” he said. “Now they’re shooting dermatologists.”

The specialists point to an epidemic, noting there are 2 million to 4 million skin cancers diagnosed in the United States each year, with a huge increase in basal cell carcinomas, the type Little had, which usually do not metastasize. (A small fraction of the cancers are melanomas, a far more serious condition.) But, said Dr. Cary Gross, a cancer epidemiologist at Yale University Medical School, “The real question is: Is there a true epidemic or is there an epidemic of biopsies and treatments that are not needed? I think the answer is both.”

Profitable dermatology

In America’s for-profit, fee-for-service medical system, dermatology has proved especially profitable because it offers doctors diverse revenue streams — from cosmetic treatments that are fully paid by the patient to medical treatments that are covered by insurance.

Cosmetic dermatology is a big moneymaker in high-income markets like New York and Miami. Botox injections take 15 minutes and cost a minimum of $500; doctors pay about $100 for the amount of medicine needed for a typical session, according to dermatologists. Still, cosmetic work makes up less than 10 percent of all skin procedures, studies show, and their volume tends to fluctuate with the economy.

For medical treatment, many dermatologists have been able to compensate for cutbacks in insurance payments by offering new services and by increasing their patient volume through hiring “physician extenders” — nurse practitioners and physicians’ assistants — to do basic tasks like biopsies and chemical peels. Whether the physician or the nurse wields the scalpel, the charge is generally the same.

The dermatology office where Little’s initial biopsy was performed is one of six satellite offices operated by the Arkansas Skin Cancer and Dermatology Center. They are often staffed by physician assistants, who refer patients to the dermatologists in Little Rock for Mohs surgery. The dermatologists also do their own pathology, meaning that they can sometimes bill extra for that service. (That also means there is no independent confirmation of a cancer diagnosis.)

With such practices, even minor dermatology procedures can lead to big bills.

Harris Williams and Co., a consulting firm, estimates the $10.1 billion dermatology market in the United States will grow to more than $13 billion by 2017, in part because of an aging population. The Affordable Care Act requires 100 percent coverage for preventive dermatology screening sessions for seniors, which will inevitably lead to more biopsies and treatment. With more doctors being trained in Mohs surgery — generally an extra year of training, though it is not required — it has become a go-to treatment.

Outrage at charges

Little left Baptist Health Medical Center with a tiny skin flap and more than two dozen stitches. For five days she said she was “hung over” from the IV sedation that she had not wanted — a problem because she drives 60 miles on rural Arkansas roads to her university each day.

She spent months arguing down her bills, which were finally reduced: About $1,400 for the Mohs surgeon, $765 for the anesthesiologist, $1,375 for the ophthalmological plastic surgeon, plus $1,050 in operating-room charges from the hospital.

For her follow-up, she refused to return to Baptist Health and went instead to the University of Arkansas Medical Center, where a dermatologist told her she likely had not needed such an extensive procedure. But that was hard to judge, because the records forwarded from Baptist did not include the photo that was taken of the initial lesion.

And she was outraged as she wrote checks for the nearly $3,000 she owed to the doctors under the terms of her insurance.